HBA-KDB C.S.S.B. 626 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 626 By: Duncan Financial Institutions 4/10/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Civil asset forfeiture provides a means for law enforcement to seize a criminal's assets from financial institutions as contraband, despite a lienholder's bona fide security interest in the property. Under current law, the lienholder must show that it acquired and perfected the security interest prior to or during the commission of the offense, and at the time the interest was acquired and perfected, that it did not know or have reason to know of the offense or that it was likely to occur. There are concerns that this allows a prosecutor, depending upon the circumstance of timing, to shift a loss that results from an individual's criminal activity to a lienholder. Additionally, there are concerns that the immediate and unexpected withdrawal of accounts or assets from a bank, depending upon the amount of the seizure in relation to the bank's assets, can jeopardize its liquidity. C.S.S.B. 626 establishes procedures for the seizure of assets from a regulated financial institution. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS C.S.S.B. 626 amends the Code of Criminal Procedure to set forth provisions regulating the seizure of accounts and assets at regulated financial institutions (institution). The bill authorizes an institution to pay an account or tender assets held as security for an obligation owed to the institution or transfer the depository account or assets to a segregated interest-bearing account in the name of the attorney representing the state as trustee at the time a seizure warrant is served. The bill also requires the institution to take action to segregate the account or assets immediately upon service of the seizure warrant and to provide evidence of the terms and the amount of the account or a detailed inventory of the assets, certified by an officer of the institution, to the peace officer serving the warrant. If the institution fails to comply with the obligations to release the depository account or assets to a peace officer pursuant to a seizure warrant or transfer the account or assets, the bill requires the court to order the institution and its culpable officers, agents, or employees to pay actual damages, attorney's fees, and court costs incurred as a result of the institution's failure to comply. The court may also find the institution and those persons in contempt. The bill releases an institution that complies with the provisions of the bill from liability in damages because of the compliance. The bill provides that the right of the state to obtain possession of physical evidence or to seize a depository account or other assets for purposes other than forfeiture is not impaired (Art. 59.12). The bill provides for the disclosure of information relating to accounts and assets at an institution by the attorney representing the state to a financial institution regulator, but requires a primary state or federal financial institution regulator (regulator) to keep information provided by the attorney confidential. The bill provides that a regulator commits an offense if the regulator knowingly discloses information in violation of this article. The bill provides that an offense under these provisions is punishable by confinement in jail for a period not to exceed 30 days, a fine not to exceed $500, or both the confinement and fine (Art. 59.13). The bill requires the attorney representing the state to notify the banking commissioner who is required to notify the appropriate regulators before taking any action that implicates a potentially culpable officer or director of an institution (Art. 59.14). The bill provides that if property is seized from the possession of the interest holder who asserts an ownership interest, security interest, or lien interest in the property, the owner or the interest holder's rights remain in effect during the pendency of proceedings as if possession of the property had remained with the interest holder (Art. 59.02). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 626 modifies the original bill by providing that the forfeiture provisions apply to contraband as defined as property of any nature that is used or intended to be used in the commission of a Class A misdemeanor for the offense of illegal dumping of litter if the defendant has been previously convicted twice of such an offense, rather than any money laundering felony, only in a municipality with a population of 250,000 or more (Sec. 59.02). The substitute removes the provision that holds a peace officer criminally liable if the peace officer intentionally subjects another to seizure that the peace officer knows is unlawful (Sec. 59.03).